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Where to invest your money
By Jeff Lakie
If you are new to investing, or even if you've been playing the market
for a while, investment options can be overwhelming. Stocks, bonds,
mutual funds. How do you pick the best place to invest your money?
That's quite a decision!
Here are some tips that can help you get started:
If you are planning for a long-term investment, it may be wisest to go
with stocks. History shows that stocks outperform other investing
options over the long term. For example, from 1926 to 2004, the
stock market had an average annual gain of 10.4%, compared with
only 5.4% for bonds and even less for other forms of investing.
That said, stocks may not be such a good option for short-term
investing. They tend to be more risky and can undergo severe losses.
Unless you're planning to keep your money there for a long time, you
might not want to weather the stress of the stock market's ups and
downs. Overall, a company's earnings are going to be the biggest
player in a stock's fluctuation.
If you're willing to take a little bit of risk with your investing-or a lot-
you probably will notice a bigger payoff. Stocks, for example, are a
riskier investment than bonds. But again, stocks tend to bring in a
much higher return. On the other hand, there is also the chance that
your stock will dip and you may suffer a great loss. That's all part of
the game.
If you're looking for a low-risk, surefire investment strategy, U.S.
Treasury bonds may be the way to go. The government has a lot of
power over these bonds. Because of this, investing in these bonds is
generally considered risk-free. Keep in mind, however, that bonds
don't do so well when interest rates rise. Conversely, when interest
rates go down, bond prices rise. This is particularly true with long-term
bonds.
To be safe, the best advice is to diversify your portfolio. If you
practice investing in a number of different areas, you are least likely to
lose it all. (Remember the Enron scandal? Don't make that mistake!)
Some investments will go up, others will go down. But at least you can
be pretty sure you won't lose it all. Chances are, with a little research,
some self-education, and careful investing, you'll build your savings
substantially. Happy investing!
About the Author
Jeff Lakie is the founder of Investing Information a website providing information on Investing
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